Rolls-Royce Presses Cost-Cutting Effort
25 November 2015 - 7:02PM
Dow Jones News
(FROM THE WALL STREET JOURNAL 11/25/15)
By Robert Wall
LONDON -- Rolls-Royce Holdings PLC Chief Executive Warren East
on Tuesday promised far-reaching restructuring at the British
engine maker after a series of earnings missteps, and he signaled
some activities could be shed even while the company remains
diversified.
The maker of engines for Boeing Co. and Airbus Group SE
jetliners plans more layoffs as the company prunes management to
streamline decision-making, which Mr. East said is overly
cumbersome.
Rolls-Royce, which previously announced 3,600 jobs would be cut
in its aerospace and marine businesses, wouldn't quantify the scale
of additional job losses. The company promises savings of GBP 150
million ($226.9 million) to GBP 200 million a year beginning in
2017, though it still is assessing upfront costs to reach those
targets. Mr. East faces pressure to show results from the
turnaround effort. The share price at the FTSE 100 blue-chip
company has declined 32% this year. U.S. activist investor ValueAct
Capital Management LP has become its largest shareholder and is
seeking a board seat.
Mr. East has repeatedly stressed that the review was focused on
operations. Strategic decisions such as whether to shed business
lines weren't on the agenda, he has said, despite concerns outside
the company that its land- and sea-engine operations are a drag on
its aerospace activities, the company's largest profit
contributor.
That doesn't mean the company wouldn't hive off some activities.
"A bit of portfolio optimization could be done," he said, without
identifying possible targets for disposal.
Rolls-Royce has struggled to deliver on previous cost-cutting
efforts and been hit by weakening demand for some civil aircraft
engines, including aftermarket support.
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(END) Dow Jones Newswires
November 25, 2015 02:47 ET (07:47 GMT)
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